Becoming a Commodity Trader

Commodity traders or brokers buy and sell commodities, either in their company's dealing rooms or on a commodity exchange. Brokers trade on behalf of their company's clients wishing to conclude an immediate spot transaction or to buy and sell at a specific time in the future. Commodity markets are separated from the actual goods, and the commodities are available anywhere in the world and at any point in time.

The job:

Working in the commodity markets involves speculating on the price of commodities at a specified date in the future. None of the markets physically handles goods, and brokers work in large trading rooms or in commodity exchanges.

Traders need to exchange information and opinions constantly with colleagues and clients to maintain their understanding of the market. Most contact with clients is by telephone. On the basis of these communications, contracts are agreed and the goods - which may be in any part of the world and moved to another part - are bought and sold.

The staff of commodity broking firms is divided into those who work on the floor of an exchange and those who are desk based. Floor traders conduct transactions by open outcry (face to face dealing with other brokers). To establish prices, traders indicate the bid, or offer price, and the quantity by shouting and by formalized hand signals to convey their message above the noise. Also, much of this work has recently moved into using technological software applications to make trades using the computer.

Trading presents a dynamic working environment where no two days are the same. Traders need to be extrovert, confident and gregarious. They are subject to minimal supervision. Because of international time differences, there is always a market open somewhere, and the pressure is on brokers to work long hours. All commodity traders need dedication and stamina to remain alert under these conditions, and it more a way of than a job. Many traders often move to other types of work by about the age of 30.

Back office and desk traders work away from the floor of the exchange. They monitor prices changes displayed on banks of screens and phone instructions to exchanges worldwide, as well as to the floor traders. Senior traders monitor desk activity and will be responsible for liaison with large clients.

There is locally important commodity exchanges-also called boards of trade and commodity markets, all over the world. The largest commodity exchange in the world is the Chicago Board of trade, which dominates the grain market. The London international and financial futures exchange is the major European futures and options exchange, while London and New York City compete on metals, soft commodities, and petroleum. There are also important exchanges in Malaysia, Singapore, and Sydney.

Training involved:

The right personal characteristics and the desire to make money from deals are considered more important attributes then academic qualifications, although a significant number of floor-based brokers are qualified to degree level.

Desk-based trading companies prefer people who are commercially astute and have a good degree in economics, management sciences, law, accountancy, geography, or languages.

Most training is carried out on the job, with trade brokers learning by assisting and observing experienced brokers at work. Trainees start by doing routine paperwork and providing clerical assistance. They may be promoted to floor dealing if they show that they have potential. University graduates are expected to progress faster third it may take trainees up to two years before they are allowed to trade up to a certain cache limit on their own initiative. The industry has its own training programs and examinations.

Future prospects:

Advancements is by means of concluding bigger and bigger deals, with proportionately higher rewards for the broker. Due to increased competition throughout the world, commodity broking organizations tend to offer only short-term contracts.

Managers work as hard as other brokers to make money for the company. The introduction of electronic communications has led to a period of rapid and unpredictable change, where whole departments have been shut down and brokers made redundant. There are occasional opportunities for travel abroad.

For further information, please contact a local commodity exchanges and their member companies for information about their activities.